The ascending bond yields and fear of rising inflation in the US made global investors and traders cautious, leading to a huge sell-off. Indian markets were also part of the domino effect with the Sensex plunging 1,939 points, or 3.80%, to end at 49,099.99 while the Nifty shed 568 points or 3.76% to end at 14,529.15. Let us look at the events that may drive the market in the week ahead.
Climbing US bond yields is the biggest concern for the stock market investors worldwide. Last week, yields on the benchmark 10-year US Treasury note crossed the 1.6% level, the highest in more than a year. The rapid rise in yields began with the failure of the Treasury’s auction of 7-year notes on Thursday. Expectations are that inflation would make a comeback as demand growth as the scale of vaccination picks pace globally. The expected economic boost from stimulus has also been driving yields higher, and it has also heightened concerns about inflation. A rising inflation would mean a reversal in the accommodative monetary stance of global central banks. Yields have been rising despite assurances from central banks that they will continue supporting markets. if this trajectory sustains over the next week, it will sound alarm bells for bond traders and stock investors alike.
Overseas investors infused Rs23,663cr in Indian markets in February owing to positive sentiment due to the Union Budget 2021-22 and robust third quarter (Q3) earnings. They pumped in a net Rs25,787cr into equities but took out Rs2,124cr from the bond market between February 1-26, according to depositories data. This led to the total net investment touching Rs 23,663cr during the period under review. The total net investment stood at Rs14,649cr last month. The total net FPIs in 2020 now stand at Rs45,260cr, as per NSDL data. So far, in the financial year 2021-22, net FPIs into equities stood at Rs2.63 lakh cr, the highest ever FPI inflow into the country.
On the economic front, Markit Manufacturing PMI and Markit Services PMI data are scheduled on March 1 and March 3, respectively. India's manufacturing sector activity strengthened as factories continued to ramp-up production in response to rising sales and new export orders. The IHS Markit India Manufacturing Purchasing Managers’ Index rose from 56.4 in December to 57.7 in January, while the Services PMI climbed to 52.8 in January from 52.3 in previous month.
Meanwhile, foreign exchange reserves for the week ended February 26 will be released on Friday.
Auto sales data
Auto stocks will see some activity today as the companies release data for the month of February. Consensus estimates expect passenger vehicle and tractors sales to remain strong. However, two-wheeler sales may not see much change. Improving demand environment and pick-up in replacement demand could provide an impetus to commercial vehicle sales.
MTAR Technologies, the maker of nuclear, defence and aerospace equipment, is hitting the market with Rs 600 crore initial public offer (IPO) on March 3 (Wednesday). The price band for the three-day IPO, which closes on March 5, has been fixed at Rs 574-575 per share. The lot size is 26 and in multiples thereof, which means investors can bid for a minimum of 26 equity shares and in multiples of 26 shares thereafter. The Hyderabad-based precision engineering solutions company is planning to raise an issue size of up to 10.37cr shares, which includes fresh issue of up to 21.48 lakh equity shares and offer for sale of up to 82.24 equity shares by promoters and investors.
MTAR has precision engineering capabilities to build nuclear and pressurized water reactors, aerospace engines, missile systems, aircraft components and many such other critical components and assemblies. It operates out of 7 manufacturing facilities, including an export-oriented unit located in Hyderabad, Telangana, and has been servicing the defence, aerospace and energy sectors for more than four decades.
Wall Street’s main indexes ended mixed on Friday even as sentiment remained fragile as fears of rising inflation kept U.S. bond yields near a one-year high the day before. The Dow Jones Industrial Average tumbled 469.64 points, or 1.5%, to finish at 30,932.37 while the S&P 500 lost 18.19 points, 0.5%, to close at 3,811.15. The Nasdaq Composite Index added 72.91 points, or 0.6%, to close at 13,192.34.
The 10-year Treasury yield fell 10 basis points to around 1.42% Friday, after surging above 1.6% at one point on Thursday. On the economic front, the latest data showed U.S. consumer spending increased by the most in seven months in January but price pressures remained muted. Trade data showed that the U.S. trade deficit in goods widened to $83.7 billion in January from a revised $83.2 billion in the prior month, the Commerce Department said Friday. Imports of goods, such as consumer electronics, rose 1.1% to $218.9 billion in January. Goods imports were up 8.2% compared with a year earlier. Exports rose 1.4% to $135.2 billion, but were down 0.7% compared with one year ago.